Milk Quotas Pre-2015

Background

Milk quotas were in place until 2014/2015. The milk quota system limited the national quota of milk.  Each milk purchaser, including cooperatives and dairy companies were required to  apply a super levy to producers who exceeded their individual quota.  Unallocated quotas could be apportioned. The super levy was a 115 percent of the target price for milk (2009 1.66 euro per gallon).

A dairy cow premium was introduced in 2004 and became part of the single payment, decoupled from production in 2005.  However, quotas remained and were tied to land.  Production was limited to the amount of individual quota.

New EU consolidated milk quota regulations were introduced in 2008.  Generally, quotas are attached to land.  In certain circumstances, they could be retained by a farmer who sold the land.  The land must be used for milk production.  This will generally mean grazing cows and replacement heifers and land use for growing fodder for them in the previous quota year in which 90 percent of quota was produced.

Leasing Quotas

Where a quota has been produced on leased land, the quota will not attach to the land.  It may be attached to other land by Departmental consent on application by the producer. Land and quotas could be sold by the landowner.  However, where the applicant sought to transfer lands to which more than 12,500 litres per hectare applied Departmental consent was required.

Milk quotes could be leased to individuals where it was leased with land attached.  Land with a milk quota could only be leased to connected entities and relatives.  Where land was inherited with a milk quota it could be leased to a relative of the deceased person.

With the agreement of the lessor, the lessee could buy a quota on the expiry of a lease on condition that he leases land and the quota attached to that land for at least 12 months or he  inherited the lessee’s interest in the lease within the previous 12 months.

The producer could transfer the quota to a qualified relative without transferring the land.  The qualified relative covered children, grandchildren, siblings, uncles, aunts, nieces and nephews together with persons related within the same degree to his or her spouse.

Where the lease of land and quota, which has approved under the early retirement scheme terminated, the lease may be renewed in 6 months by the same lessee or a qualified relative. Existing land and quota leases could be renewed within 6 months of the date of expiry of the original lease.

Farmers could lease their quotas to a limited company where they are the main shareholder and are an active dairy farmer.  They must also lease their single farm payments entitlement.

Purchase and Exchange

The milk quota exchange trading scheme was operated by cooperatives but managed by the Department of Agriculture. Milk quotas could be sold into the scheme subject to conditions.  Farmers who sold part or all of their quota were required to cease deliveries by a particular date.  Once they had sold the quota, they were not entitled to be allocated a new quota from future schemes.

Where a quota was purchased from the scheme, it could only be sold back to the scheme for a period of 3 years.  A farmer wishing to sell a quota could apply specifying the quantity on offer and the selling price per litre. 30 percent of the amount offered for sale must be allotted to a primary pool with a maximum price of 0.10 cent per litre and the remaining 70 percent could be offered on the trading exchange.

Farmers could purchase quotas from the scheme from the cooperative or dairy where they hold a permanent quota, at which they have made deliveries in the production year.  An application to purchase must be submitted specifying the maximum amount required and the purchase price.  The maximum quantity that might be purchased was 80,000 litres.

Where priority approval scheme provides a maximum price per quota.  It could  be less if the equilibrium price were achieved below that amount. Access to the priority approval was granted  to certain categories in priority

First priority was the sons and daughters of persons who had their schemes quota under restructuring schemes between 2000 and 2006.  They had priority to make up to the amount surrendered. Priority was given to farmers whose land and quota leases expired within last 3 years and had not been renewed (to 2008).

New entrants to farming under 35 years of age; This includes new dairy and non-dairying farmers, sons and daughters participating in partnership with a parent, who is a milk -producer, a farm manager in partnership with a milk producer and a recent entrant with a quota.

The exchange worked by submission of offers to sell and bids to buy.  A weighted average of bids was assessed taking account of volume and price and an initial equilibrium price was determined.  Where bids to buy exceeded the initial equilibrium price by 40 percent, bids that exceed the initial price by 40 percent were removed and the equilibrium price was recalculated to give a market-clearing price.

Bids to buy quota at or above the market-clearing price were deemed to purchase at the market-clearing price.  Bids below this amount were rejected. Offers to sell below the market-clearing price were deemed sold at the market-clearing price.

Farmers who wished to offer unused quota into the scheme must have delivered at least 20 percent of their quota for the relevant year.  With a ministerial declaration approving the offer,  a producer who had not delivered the minimum amount or had made no deliveries, may offer the unused quota into the scheme.  Approvals would only be granted exceptionally where there was good justification.

Dormant and Lost

Quota holders who had made no deliveries and did not intend to resume deliveries were not eligible for approval.  Those who had ceased production and failed to sell some or all of their quota in the relevant years trading scheme were exempt from the requirement to obtain a departmental declaration and could apply directly to their co-op.  Quota holders who had been dormant as a result of termination of a lease might be exempted with a requirement to obtain departmental consent.

Producers with entitlements to a successor or lost lease category under the milk quota trading scheme had priority to lease quota in the temporary leasing scheme.  Where successors,  the entitlement in the temporary leasing scheme, was the predecessor’s entitlement less the quantity purchased in the priority approval under that scheme.

Producers who had lost land and quota leases had a certain priority as to a particular amount; as to two-thirds of milk quota leased in certain reference years less additional quota granted under certain previous schemes

Organic Producers

Following a general increase in EU wide quota of 2 percent, the Department of Agriculture made an additional quota available to organic milk producers in Ireland subject to certain conditions.  Applicants were required to have a current licence from one of the organic certification bodies and must be delivering milk to a recognised organic milk purchaser.

The maximum quota that could be allotted was 45,000 litres to an eligible applicant.  Applicants who had already received quotas as a result of participation in organic milk production could only receive up to a maximum of 45,000 litres in total.

The milk quotas were only available to recipients while they were engaged in organic milk production and continued to supply a recognised organic milk producer or continued producing organic milk for direct sales.  When the producer ceased organic milk production, the quota reverted to the national reserve. A producer may continue the quota if the enterprise was transferred to a successor by way of inheritance or similar disposition, other than a sale. Quotas under the scheme could not be sold transferred or leased.

Milk Partnerships

Persons holding milk quotas could enter partnership subject to conditions. Teagasc was the registration body.  Annual certification of compliance was required.  Only bona fide partnerships could operate.  They could not circumvent the rules relating to leasing.

A milk production partner had to consist of at least one milk producer who had produced and delivered milk in the two preceding quota years and one or more persons in that category or one of the following categories

• new entrants with appropriate qualifications who was participating with a parent
• farmers who had been farming in their own right for a minimum of 2 years preceding the milk quota year,
• a farm manager with appropriate qualifications followed by at least 3 years of employment in farm management.

The partnership agreement was required to operate for a minimum of 5 years.  They must agree to pool agriculture lands, assets, entitlements and the quota owned or leased at their disposal within the State. A new entrant under 35 must not exceed an off-farm income limit of €40,000 during the partnership period.

If the enterprise was transferred to a successor by way of inheritance or similar disposition, other than a sale. Quotas under the scheme could not be sold transferred or leased.

Conditions

Persons holding milk quotas could enter partnership subject to conditions. Teagasc was the registration body.  Annual certification of compliance was required.  Only bona fide partnerships could operate.  They could not circumvent the rules relating to leasing.

A milk production partner had to consist of at least one milk producer who had produced and delivered milk in the two preceding quota years and one or more persons in that category or one of the following categories

• new entrants with appropriate qualifications who was participating with a parent
• farmers who had been farming in their own right for a minimum of 2 years preceding the milk quota year,
• a farm manager with appropriate qualifications followed by at least 3 years of employment in farm management.

The partnership agreement was required to operate for a minimum of 5 years.  They must agree to pool agriculture lands, assets, entitlements and the quota owned or leased at their disposal within the State. A new entrant under 35 must not exceed an off-farm income limit of €40,000 during the partnership period.